Bank Statement Loans Debt To Income Requirements

DTI Purpose and Maximum Limits

Bank Statement Loans Debt To Income requirements are a crucial part of the Ability-to-Repay (ATR) assessment, even though these programs offer flexible income verification. The Debt to Income (DTI) ratio is calculated by adding the borrower’s total monthly mortgage payment (PITIA) and all monthly obligations, then dividing this total by the borrower’s qualifying monthly income. The income used is the imputed net income derived from the bank statement analysis.

A. Maximum DTI Thresholds

While Qualified Mortgages (QM) are typically capped at a 43% DTI ratio, Bank Statement Loans (Non-QM) often allow for higher ratios, especially when the borrower exhibits strong compensating factors.

Standard Maximum DTI: Many lenders, such as NASB, require a 50% maximum debt-to-income ratio for BSLs.
Expanded DTI: Certain programs, like the Sharp Expanded program, may permit a DTI up to 55%. Achieving this higher DTI requires stringent standards, typically including a minimum FICO score of 700 or greater and a maximum Loan-to-Value (LTV) of 80% (for a Primary Residence only, excluding First-Time Home Buyers).

Inclusion and Calculation of Debts in DTI

All liabilities of all borrowers must be accurately documented and considered in the DTI calculation for Bank Statement Loans.

A. Treatment of Installment and Revolving Debts

Liability Type	DTI Calculation Rule
Installment Debt	Installment loans (including mortgages) must be included in the DTI calculation. They may be excluded if they are paid off prior to or at closing.
Installment Debt Paid Down	Installment loans that are being paid down to 10 or fewer remaining monthly payments generally do not need to be included in the DTI ratio.
Revolving Debt	Use the payment shown on the credit report, the minimum payment on the account statement, or the greater of $10 or 5% of the outstanding balance if no payment is stated. Revolving accounts being paid off at or prior to closing do not need to be included.
30-Day Charge Accounts	May be excluded from DTI if the balance is subtracted from the borrower’s liquid assets for the purpose of calculating cash to close and reserves. Otherwise, a payment of 3% or 5% of the outstanding balance must be used in the DTI ratio.

Deferred Debts (Student Loans and HELOCs)

Liability Type	DTI Calculation Rule
Deferred Installment Debts	Deferred Installment Debts, such as deferred student loans, must be included as part of the borrower’s recurring monthly debt obligations.
Deferred Payment Calculation	If the credit report reflects a $0 payment for a deferred or forbearance loan, or if a payment cannot be determined, the lender must utilize 1% of the outstanding balance of the debt. For income-driven plans with a $0 payment, the plan documentation must be obtained to verify the actual monthly payment is $0.
HELOC (Home Equity Line of Credit)	If a HELOC has a current outstanding balance with no payment reflected on the credit report, the payment may be documented with a current billing statement. If no payment is documented, 1% of the outstanding balance should be used. HELOCs with a current $0 balance do not require a payment unless funds are being used for closing costs.

Treatment of Business-Related and Secured Debts

A. Business Debt Exclusion

When a self-employed borrower claims that a monthly obligation appearing on their personal credit report is actually being paid by their business, the payment may be excluded from the individual DTI if:

The business provides acceptable evidence that the obligation was paid out of company funds.
The borrower can provide 6 months of canceled checks drawn against the business account or business bank statements reflecting sufficient assets to cover the debt.
- Mortgage Exclusion Exception: Mortgage debt may not be excluded from the DTI ratio, even if paid by the business.
- Customary Business Debt: Customary business debt (like auto or business credit cards) may be excluded from DTI if there is evidence of 6 months of payments made from the business statements.

B. Court-Ordered Debts (Alimony and Child Support)

Child Support and Separate Maintenance must be included as a liability on all three Alt Doc product types (Bank Statement, 1099 Only, P&L Statement Only).
Alimony Obligations may be deducted from the borrower’s qualifying income in lieu of being included as a liability, provided the payments are tax deductible to the payor. The terms of the payment must be documented via the divorce decree, court order, or similar legal agreement.

C. Loans Secured by Assets

Payments on loans secured by the borrower’s liquid financial assets (such as a 401(k), IRA, or life insurance policies) can be excluded from the total DTI ratio if documentation proves the asset is collateral for the loan.

If the borrower intends to use the same asset for reserve requirements, the value of the asset must be reduced by the secured loan amount to determine sufficient reserves.

FAQ's

Is there a minimum residual income required if the DTI ratio is above the standard limit?

Yes. For Non-QM Alt Doc programs (including Bank Statement Loans), if the DTI is over 43%, a minimum residual income of 1,500∗∗mayberequired.Someprogramsrequirearesidualincomeof∗∗2,500 for Bank Statement loans.

Are payments on 30-day charge accounts (like some AmEx accounts) required to be included in the DTI ratio?

For open 30-Day Charge Accounts, the monthly payment is generally not considered in the DTI ratio if the balance is subtracted from the borrower’s liquid assets for the purpose of calculating cash to close and reserves. Otherwise, a payment of 3% or 5% of the outstanding balance must be used.

What is the rule for including loans secured by financial assets, such as a 401(k) loan?

Payments on loans secured by liquid financial assets (like 401k, IRA, or life insurance policies) are not considered in the DTI ratio if documentation is provided to show the financial asset is being used as collateral for the loan.

How is the payment for a revolving debt (like a credit card) determined if the credit report doesn't show a minimum payment?

If no minimum payment is stated on the credit report, the payment included in the DTI ratio must be the greater of $10 or 5% of the current outstanding balance.

If the borrower has a recurring debt (like a car payment) that is paid by their business, can it be excluded from their personal DTI?

Customary business debt, such as an auto or business credit card, may be excluded from the DTI if the borrower provides acceptable evidence of 6 months of payments made from the business statements. However, mortgage debt paid by the business may not be excluded.

How are deferred student loans or loans showing a $0 payment included in the DTI calculation?

Deferred Installment Debts, such as deferred student loans, must be included as part of the recurring monthly debt obligations. If the credit report reflects a $0 payment or the payment cannot be determined, the lender must utilize 1% of the outstanding balance of the debt.

If a borrower pays off an outstanding revolving debt or installment debt at closing, is it still included in the DTI calculation?

No, revolving account balances and installment loans that are being paid off at or prior to closing do not need to be included in the DTI ratio.

How are payments on installment loans (like car loans) factored into the DTI ratio?

Installment loans must be included in the DTI ratio. However, the payments can be excluded if there are 10 or fewer remaining monthly payments left on the debt.

Can a borrower qualify with a DTI higher than 50%?

Yes, certain programs may allow a DTI up to 55%. This higher DTI threshold typically requires strong compensating factors, such as a minimum FICO score of 700 or greater.

What is the maximum Debt-to-Income (DTI) ratio generally permitted for a Bank Statement Loan?

The maximum Debt-to-Income (DTI) ratio allowed for Bank Statement Loans (Non-QM products) is typically limited to 50%.

527 Sycamore Valley Rd W, Danville, CA 94526
Toll Free Call : (866) 280-0020

For informational purposes only. No guarantee of accuracy is expressed or implied. Programs shown may not include all options or pricing structures. Rates, terms, programs and underwriting policies subject to change without notice. This is not an offer to extend credit or a commitment to lend. All loans subject to underwriting approval. Some products may not be available in all states and restrictions may apply. Equal Housing Opportunity.
Interactive calculators are self-help tools. Results received from this calculator are designed for comparative and illustrative purposes only, and accuracy is not guaranteed. Shining Star Funding is not responsible for any errors, omissions, or misrepresentations. This calculator does not have the ability to pre-qualify you for any loan program or promotion. Qualification for loan programs may require additional information such as credit scores and cash reserves which is not gathered in this calculator. Information such as interest rates and pricing are subject to change at any time and without notice. Additional fees such as HOA dues are not included in calculations. All information such as interest rates, taxes, insurance, PMI payments, etc. are estimates and should be used for comparison only. Shining Star Funding does not guarantee any of the information obtained by this calculator.

CMG Mortgage, Inc. dba Shining Star Funding, NMLS ID# 1820 (www.nmlsconsumeraccess.org, www.cmghomeloans.com), Equal Housing Opportunity. Licensed by the Department of Financial Protection and Innovation (DFPI) under the California Residential Mortgage Lending Act No. 4150025. To verify our complete list of state licenses, please visit www.cmgfi.com/corporate/licensing